TIDMAEG
RNS Number : 5731D
Active Energy Group PLC
27 June 2019
Active Energy Group Plc / EPIC: AEG / Sector: Alternative
Energy
27 June 2019
Active Energy Group Plc
('Active Energy', 'AEG', the 'Company' or the 'Group')
Final Results for the Year Ended 31 December 2018
Active Energy, the London quoted international biomass based
renewable energy and forestry management business, announces its
final results for the year ended 31 December 2018. The Company's
Annual Report and financial statements for the year ended 31
December 2018 will be posted to shareholders shortly and will also
be available on the Company's website,
www.aegplc.com/investors/corporate-documents/ later today.
The Notice for the Company's forthcoming AGM will shortly be
posted to shareholders separately and will also be made available
on the Company's website.
Overview
-- Advanced strategy of become a US based developer and supplier
of renewable based fuels through the establishment of a commercial
hub based on the East Coast of America
-- Lumberton site is a 415,000 sq. ft of covered factory space
and circa 151 acres of surrounding land and includes ancillary
facilities, such as water treatment, an analysis lab and
offices
-- Construction of first prototype CoalSwitch(TM) plant
completed enabling the commercial development of CoalSwitch(TM)
-- 5tph plant targeted for H22019 and 50tph plant for 2020
-- Secured cutting timber permits in the Province of Newfoundland and Labrador
-- Signed strategic partnerships with Georgia Renewable Power
and Cobant, coupled with ongoing collaboration with global
engineering group Andritz to further the commercialisation of
CoalSwitch(TM) technology and development of alternative renewable
fuels
-- Global wood pellet imports were 24million tonnes in 2018 and
the global wood pellet market is forecast to rise to over 35
million tonnes per annum by 2025 (source: Futuremetrics 2018.)
Broker Update
SP Angel Corporate Finance LLP is now the Company's sole broker
with immediate effect and remains the Company's Nominated
Adviser.
CHIEF EXECUTIVE'S STATEMENT
2018 was an important year for Active Energy as it focussed on
building its position as a developer and supplier of renewable
based fuels. It completed the construction of the first prototype
plant to utilise the CoalSwitch(TM) technology and commenced on a
strategy of commercial development for CoalSwitch(TM) as both a
renewable fuel by itself, as well as a component for derivative
renewable fuels combining with other biomass and coal based
material.
During 2018 AEG achieved several significant developmental
milestones and the Board's focus moved from validating the
feasibility of the technology, to identifying the important
commercial opportunities which must be focused on to successfully
develop CoalSwitch(TM).
In February 2018, AEG announced the opening of the first
CoalSwitch(TM) reference plant in Utah, US (the "Reference Plant"),
which represented a significant achievement for the CoalSwitch(TM)
programme. It was the first scalable plant with an ability to
produce CoalSwitch(TM) in sufficient quantities to meet prospective
customer demand. Although the Reference Plant was subsequently
verified by a number of commercial partners & customers, the
Board recognised that it had to be relocated to commence commercial
production as the Utah site was not in an optimal location for
scalable production.
At the same time, the Group continued to focus on feedstock
business opportunities which would assist the commercial
development of the CoalSwitch(TM) programme. The Group had worked
extensively with the Province of Newfoundland and Labrador, (the
"Province") to secure forestry rights which could provide a
commercial base for a CoalSwitch(TM) operation in the Province. The
process took time to complete, but in November 2018, the Group
secured cutting timber permits ("CTPs") for Blocks 17 and 18 in the
Province. The Group believes that this represents a starting point
for a long-term relationship with the Province and has been in
active conversations to assess additional complementary
opportunities in the Province.
In tandem with the above, additional feedstock opportunities
were identified in North America, Europe and Asia to complement the
CoalSwitch(TM) programme and each geography has its own unique
circumstances. Accordingly, the Board believes that the optimum
route to market is now through the actual production of
CoalSwitch(TM) to sell to end customers with a lesser focus on the
feedstock supply issues.
With this in mind, the Board made a series of strategic
decisions in mid-2018 to accelerate the commercialisation of
CoalSwitch(TM). The first decision was to choose the optimal
location for the business in the US. Upon thorough investigation,
the Board decided that the prime base had to be on the East Coast
of the US. The area has huge amounts of lumber feedstock, an
established transportation infrastructure and links both
domestically and to pellet markets in Western Europe and Asia.
The pellet market has been growing significantly since 2014,
most notably, in Europe. Global wood pellet imports were 24million
tonnes in 2018 and the global wood pellet market is forecast to
rise to over 35 million tonnes per annum by 2025(source:
Futuremetrics 2018.) The market for a CoalSwitch(TM) pellet remains
highly attractive with potential customers indicating an enthusiasm
for the pellet and for Active Energy to commence deliveries as soon
as possible. The Group has therefore updated its business strategy
to capitalise on this and optimise the business opportunities.
The second key decision was to accelerate AEG's commercial
strategy with the establishment of partnerships in the industry.
The Board believes that, in consideration of the Group's available
resources, the optimal way to build a global franchise is through
such industry partnerships.
In 2018 the Group started to establish these commercial
partnerships. The first, signed in the fourth quarter of 2018, was
a joint venture agreement with Georgia Renewable Power LLC ("GRP")
to advance the commercial development of CoalSwitch(TM) in North
Carolina and further examine the derivative product
opportunities.
The second significant collaboration to assist the Group was
with Andritz. A global engineering group focussed on the supply of
equipment to the pulp and paper industry, Andritz completed an
assessment of the initial pilot plant in Utah and agreed to work
with the Group in forthcoming commercial opportunities. In the
first half of 2019, this partnership has strengthened with joint
presentations to prospective customers and the establishment of a
technical programme, which aims to produce a new facility with
production capacity up to 50 tonnes per hour.
The third partnership was with Cobant in Poland. Cobant has
commenced test production for the recovery of environmentally
damaging coal fines stored in coal slurry ponds in Poland. Through
testing at their proprietary laboratories, Cobant established that
CoalSwitch(TM) could be used as a binder to form briquettes
suitable for burning, either to existing coal plants, or into the
retail market. The relationship was extended with the formation of
a joint venture to jointly examine commercial opportunities and
examine financing opportunities, including EU funding. Testing and
analysis for the fuel including CoalSwitch(TM) was completed in
Poland. As announced on 9 April 2019, although the EU grant funding
has not been forthcoming at this time, the collaboration with
Cobant has been important. Their support has been highly valued,
and the Board hopes that joint commercial opportunities can be
established in Poland in the coming months.
The Board continues to actively explore other commercial
industrial partnerships with the prime focus being the production
of CoalSwitch(TM) and the creation of revenues from CoalSwitch(TM)
either as a renewable fuel of itself, or as component for other
renewable fuels including other waste biomass products.
Developments since December 2018
As mentioned, the Group recognised that for its corporate
strategy to succeed, it needed an operational base in the prime
lumber regions of the US, especially with its new relationship with
GRP. During the fourth quarter of 2018 and into the early months of
2019, the Group focused on identifying a suitable site to achieve
these objectives.
In the first quarter of 2019, AEG acquired an industrial site in
Lumberton, North Carolina ("Lumberton Site"). The site will become
the new base for all Active Energy's CoalSwitch(TM) operations in
the US and house the first permanent production facility for
CoalSwitch(TM). It includes up to 415,000 sq. ft of covered factory
space and circa 151 acres of surrounding land and was purchased for
a total consideration of US$3,330,000. It also includes ancillary
facilities, such as water treatment, an analysis lab, offices and
IT hardware, thus reducing the amount of capital expenditure
required for the Lumberton Site.
The Directors believe that the size of the Lumberton Site will
ensure significant scope for the expansion of the initial
CoalSwitch(TM) plant via the addition of extra CoalSwitch(TM)
production facilities targeting capacity of up to 400,000 tonnes
per annum during 2021. Furthermore, the Directors expect that AEG
will benefit from complementary biomass, saw logging and other
renewable technology opportunities in the Lumberton area.
The Lumberton Site is of significant strategic importance to
AEG. It provides access to the prime lumber district in the US,
steam and power via AEG's joint venture partner, GRP, as well as
proximal access to the Eastern Seaboard of the United States,
ensuring that AEG is connected to established export routes for
sales to Europe and South East Asia. In recent weeks, long term
local feedstock supply contracts in North Carolina have been
completed, ready to commence lumber deliveries as soon as the
existing 5 tonne per hour plant is operational. This contract can
be expanded to supply up to 800,000 tonnes of lumber per annum to
the Lumberton Site.
The Board believes that these developments provide the bedrock
for the future development of the business by providing key
elements required to commercialise the CoalSwitch(TM) product,
namely access to significant quantities of feedstock, access to
power and steam, the establishment of proven and scalable
technology and easy access to routes to market.
As a result, AEG has now completed the relocation of the
existing Reference Plant from Utah to the Lumberton site, with the
intention of commencing CoalSwitch(TM) production at a rate of 5
tonnes per hour in the second half of 2019. AEG's recent
collaboration with Andritz means that developments are well
underway to significantly increase the production capacity at the
Lumberton Site, aiming for a 50 tonne per hour plant facility
before the end of 2020. Andritz and AEG are currently working
together on the designs for this new plant facility.
The support for the Group in the local region has been positive.
In April 2019 the Group was awarded a US$500,000 building re-use
and renovation grant for the site after the North Carolina Rural
Infrastructure Authority voted to support the project. This is
being allocated through the Community Development Block Grant
programme of the U.S. Department of Housing and Urban Development
and administered in part by the North Carolina Department of
Commerce.
Further grants are currently being evaluated and the Group is
working with its partners to make the Lumberton Site the primary
base for all the Company's U.S. CoalSwitch(TM) operations and the
focus of the Lumberton Site as a renewable energy hub.
Financial Review:
Overview
During 2018 management has focused on reducing costs and
strengthening the Group's balance sheet. As a result, losses
attributable to AEG excluding non-cash share based payment were
limited to US$2,360,674 (2017: US$ 14,476,213). Similarly, the
Group's overall net assets position has improved to US$497,408
(2017: net liabilities US$2,534,966).
Consolidated income statement
Following the losses in 2017 associated with the discontinuance
of the Ukrainian wood fibre business, the Group focused its efforts
on reducing costs and minimising losses in 2018. As a result, total
comprehensive loss for the year attributable to owners of the
parent was limited to US$3,256,104 (2017: US$14,783,962). Excluding
non-cash share based payments losses attributable to AEG were
limited to US$2,360,674 (2017: US$ 14,476,213). The primary
elements of the consolidated income statement are as follows:
-- Revenues were US$195,000 (2017: US$nil) reflecting the
provision of engineering consultancy services associated with the
Group's CoalSwitch(TM) technology.
-- Research and development costs of US$nil (2017:
US$2,389,807). The 2017 expenses reflect AEG's investment in
research and development associated with CoalSwitch(TM) technology,
prior to the construction of the first reference plant.
-- An impairment charge of US$950,700 (2017: US$nil) was
recorded against the Northern Alberta and Ukrainian intangible
development assets, reflecting a re-evaluation of the economics of
these assets.
-- Administrative expenses were US$2,982,866 (2017:
US$2,870,721) reflecting ongoing corporate costs and business
development activity. Excluding non-cash share based payments,
administrative expenses were US$2,087,436 (2017: US$2,562,972)
reflecting cost reduction initiatives undertaken in 2018.
-- Finance expenses were US$406,929 (2017: US$3,031,054),
reflects ongoing servicing of the Group's Convertible Loan Notes,
offset by interest capitalised to tangible and intangible fixed
assets and foreign exchange gains.
-- Loss on discontinued operations of US$386,994 (2017:
US$7,284,981) reflects the close out of contractual matters
associated with Active Energy's former Ukrainian wood chip
operations. No further costs are expected to be incurred on these
operations, which ceased during 2017.
-- The tax credit of US$1,346,010 (2017: US$355,491) reflects
income associated with research and development tax rebates.
Statement of financial position
During 2018 the Group has focused on stabilising its financial
position and as a result the Group's overall net assets position
improved to US$497,408 (2017: net liabilities US$2,534,966.) The
primary elements of the consolidated statement of financial
position are explained below.
-- Non-current assets increased to US$14,587,953 (2017:
USD12,633,431). This increase primarily relates to investment in
the construction of the CoalSwitch(TM) reference plant in the first
half of 2018 of US$2,069,877; combined with investment of
US$596,345 in CoalSwitch(TM) related intellectual property and
costs incurred of US$804,103 to secure timber licences in
Newfoundland and Labrador, partially offset by the impairment
charges discussed above.
-- Current assets increased to US$2,003,178 (2017: US$680,300)
reflecting anticipated research and development tax rebates.
-- Current liabilities increased to
US$4,179,400(2017:US$2,034,283) reflecting increased shareholder
loans.
-- Non-current liabilities decreased to US$11,914,323(2017:
US$13,814,414) reflecting the conversion of convertible loan notes
into ordinary equity shares during 2018.
-- Equity attributable to owners of the parent improved to
US$497,408 (2017: negative US$2,534,966) as a result of the
following:
Ø In June 2018 the Company announced that it had raised GBP1m
(before expenses) through an issue of equity via an oversubscribed
placing of new equity with new and existing investors.
Ø In November 2018 AEG raised a further GBP1.495 million (before
expenses) via the issue of new equity. In addition, certain
creditors resolved to receive a total of 15,500,000 ordinary shares
of 1p each ("Ordinary Shares") in lieu of cash in consideration for
services provided to the Company.
Ø During 2018 certain holders of convertible loan notes elected
to convert their notes into shares, resulting is the issue of
ordinary equity shares during 2018.
Ø Movements in the consolidated income statement described
above.
Post year-end developments
Since the end of 2018 the Group has continued to stabilise and
secure its financial position. On 4 March 2019 the Company
announced that it had completed a fund raising of US$3,413,000 (or
GBP2,573,906) (before expenses) through the subscription of
convertible loan notes by new and existing institutional investors
in order to acquire its industrial site in Lumberton, North
Carolina. Furthermore, on 23 April 2019 the Group announced that it
had been awarded a US$500,000 building re-use and renovation grant
for the Lumberton site. Management continues to actively discuss
opportunities with existing and prospective partners and potential
providers of project finance, in order execute Active Energy's
business plan following the acquisition of the Lumberton Site.
Corporate:
During 2018, our board composition changed to reflect the
strategic development of the business. In Q1 2018, Brian
Evans-Jones stepped down and shortly thereafter, we welcomed Simon
Melling as a Non-Executive Director. Simon brings with him over 30
years' experience of working in senior roles within the finance
sector. Simon was previously the CEO of AIM listed stockbroker
Cenkos Securities Limited and is currently CEO of Vermeer LLP. In
July 2018 Richard Spinks relinquished the role of Chief Executive
Officer for the Group and Michael Rowan assumed this position.
Mr. Spinks later stepped down as an Executive Director of the
Group in October 2018 and has now resigned from all positions
within the AEG Group. In December 2018, Antonio Esposito joined the
Board. Mr Esposito is a qualified engineer with over 18 years'
experience in logistics, operations, business development and
project management globally and has an in-depth understanding of
commodities export and global markets with a notable focus on woods
and biomass-based fuels.
Furthermore, we are in active discussions with individuals to
join the Senior Management team in the coming months along with
candidates to join the Board, as we look to strengthen our team
ahead of the production and commercialisation phase.
Outlook:
2018 was a pivotal year for AEG, where the Board made the
necessary decisions to optimise the commercial opportunities for
CoalSwitch(TM). The core technology has been supported by
independent analysis from commercial partners and the Group's sole
focus must be on execution of a profitable business plan. Recent
conversations have only supported this strategy and more
prospective partners are now emerging as the Lumberton Site gets
closer to scalable production.
Following the acquisition of the Lumberton Site and commercial
partnerships with GRP and Cobant, coupled with the Company's
ongoing collaboration with Andritz, the Board believes that the key
strategic elements are now in place to underpin the future
development of the business and successful roll out of
CoalSwitch(TM) as a black pellet fuel.
I would like to take this opportunity to thank all members of
the current team for their commitment and dedication to AEG.
2018 presented challenges, and with the continued dedication of
our team, combined with the inherent value in our technology and
revised business model, I am confident that we can reach our
immediate commercial and strategic goals. We look to capitalise on
the opportunities arising from the changes occurring in the coal
fired-power and biomass industries through the commercialisation
and delivery of a second-generation biomass black pellet fuel and
its derivative products.
Michael Rowan
Chief Executive Officer
26 June 2019
OPERATIONS REVIEW
The Group's primary activities are centred on the
commercialisation of its CoalSwitch(TM) product and process
supported by a forestry management business, Timberlands.
CoalSwitch(TM)
CoalSwitch(TM) uses patented technologies to create a new second
generation biomass fuel which can be briquetted or pelleted as
required by customers. CoalSwitch(TM) has a number of significant
advantages compared with existing biomass fuels such as torrefied
or white pellet alternatives, namely and among others:
-- Lower unit costs reflecting lower feedstock costs.
CoalSwitch(TM) technology can process lower quality fibre materials
such as forestry residuals and waste wood including waste, bark,
branches leaves, needles and salty hog thus reducing feedstock
costs.
-- CoalSwitch(TM) has a higher energy density than alternative biomass fuels.
-- CoalSwitch(TM) has a higher bulk density than alternative biomass fuels.
-- CoalSwitch(TM) when pelletised is hydrophobic meaning that
the pellets do not degrade in water in the same way as traditional
white or torrefied pellets. In addition, CoalSwitch(TM) pellets can
be transported with minimal losses/degradation due to being almost
dust-free in storage, handling or transport.
-- CoalSwitch(TM) pellets can be used in coal fired power
stations, without the need for significant capital expenditure for
retrofitting and modifying existing coal burning facilities.
AEG first became involved in this ground-breaking technology in
2015. During 2016 & 2017 work was primarily focused on research
and development activities. 2018 was a pivotal year for the
commercial development of CoalSwitch(TM) technology.
Construction of Reference Plant
In September 2017, AEG announced that it was constructing a
five-tonne-per-hour CoalSwitch(TM) plant at its premises in Utah,
USA. In February 2018, AEG announced the opening of this plant.
During the first half of 2018, AEG operated the facility, albeit
with the customary issues as one would expect when commissioning
any new technology or equipment. Additional testing of the design
and functionality of the reactors was undertaken, and samples were
produced. The Board regarded the completion and initial testing of
the plant as the significant breakthrough in the development of the
CoalSwitch(TM) business model, showing that the initial reactor
results and positive laboratory results can be upscaled to
industrial scale production facilities.
At the end of the H1 2018, the Board decided to limit activity
at the Utah Reference Plant, pending review of the optimal
deployment of this facility, which included a potential sale of the
Reference Plant at that time to a customer. The review is now
complete, and AEG has now moved the Reference Plant to the
Lumberton site in North Carolina, where it intends to commence
scalable production in the second half of 2019.
Activities in North Carolina, United States of America
During the fourth quarter of 2018 and into the first half of
2019, North Carolina, USA emerged as the centre of activity for
AEG's CoalSwitch(TM) business. This jurisdiction is ideally placed
to leverage value from AEG's CoalSwitch(TM) technology, as it
provides access to the prime lumber district in the US, as well as
proximal access to the Eastern Seaboard of the United States,
ensuring that AEG is connected to established export routes for
sales to Europe and South East Asia.
On 15 October 2018, AEG announced that it had entered into a
joint venture agreement with Georgia Renewable Power LLC to advance
the commercial development of CoalSwitch(TM). The aim of the joint
venture is to leverage the significant synergies between GRP and
AEG's businesses including GRP's established steam and drying
infrastructure at its existing power plants. The joint venture also
intends to work on a number of additional projects, including the
creation of black pellet fuel inclusive of poultry litter (a
beneficiated pelletised fuel derived from poultry litter) using
CoalSwitch(TM) technology.
On 27 March 2019, AEG announced that it had completed the
acquisition of an industrial site in Lumberton, North Carolina for
a total consideration of US$3,330,000. The site, which includes up
to 415,000 sq. ft of covered factory space and approximately 151
acres of surrounding land, is the new base for all Active Energy's
CoalSwitch(TM) operations in the US. The Lumberton Site has a
number of additional advantages for AEG:
-- It is strategically located close to AEG's joint venture
partner GRP thereby providing access to steam and power, required
to operate CoalSwitch(TM) facilities.
-- The Lumberton Site is fully permitted for operations and the
permits, thus reducing the time to market of the planned production
of CoalSwitch(TM).
-- The Lumberton Site includes key ancillary facilities, such as
water treatment, an analysis laboratory, offices and IT hardware,
thus further reducing the amount of capital expenditure
required.
-- The Directors believe that the size of the Lumberton Site
provides significant scope for the expansion of the initial
CoalSwitch(TM) plant via the addition of extra CoalSwitch(TM)
production facilities. Furthermore, the Directors expect that AEG
will also benefit from complementary biomass, saw logging, rental
and other commercial opportunities in the Lumberton area. The site
is also eligible for government grants and support and in April
2019, the Group was awarded a US$500,000 building re-use and
renovation grant.
-- As part of Active Energy's due diligence on the Lumberton
Site, the Company's Directors reviewed an independent valuation
report on the Lumberton Site. The report, which was dated November
2017, valued the Lumberton Site at US$4,550,000.
AEG has relocated the existing Reference Plant from Utah to the
Lumberton Site, with the intention of commencing CoalSwitch(TM)
production at a rate of 5 tonnes per hour in the second half of
2019. AEG is targeting additional investment and development in
order to increase production capacity via a new 50 tonne per hour
production facility with the ability to produce to up to 400,000
tonnes per annum from 2021.
Joint Venture in Poland and Test Results from the Polish
Government
On 13 March 2018, AEG announced that it had signed a joint
venture agreement with Cobant Sp. z o.o. a Polish research,
development and environmental waste coal recovery company active in
the land reclamation, environmental services and energy sectors.
The joint venture's primary objective was the production and
commercialisation of a "SuperFuel(TM)" product that blends
CoalSwitch(TM) with reclaimed coal from coal slurry dumps in Upper
Silesia, Poland. On the 13 June 2018, AEG announced that the joint
venture received confirmation from the Polish Government Burn Test
Laboratory that testing had been completed on the "SuperFuel(TM)"
product. The test results demonstrated that the "SuperFuel(TM)" has
a similar calorific value to coal with significantly lower sulphur
content and low ash and SOx and NOx emissions. Receipt of approval
from the formal independent certification tests enable the
commencement of commercial production of the "SuperFuel(TM)" for
use in coal fired power stations across Poland, and also in
municipal heating and private household heating systems. In
addition, this approval certified the "SuperFuel(TM)" product to
carry the Polish Government's Ecological Safety Symbol, a
requirement to allow solid fuels to be sold without restriction in
Poland.
In August 2018, the joint venture applied to the EU to request
grant funding to support further development of the SuperFuel(TM)
technology. In April 2019, the joint venture was notified that,
whilst the Company's application scored highly, it had been
unsuccessful in receiving funds. AEG and Cobant are working
together to develop the optimal strategy for CoalSwitch(TM) and
SuperFuel(TM) related opportunities in Poland.
South East Asia Activities
During 2018 and into 2019 the strategic focus of AEG has shifted
towards North America, and specifically opportunities in North
Carolina and Canada, and resources have been dedicated to those
regions accordingly. Nevertheless, AEG is continuing to make
progress in South East Asia. The research and development program
into the creation of CoalSwitch(TM) from empty fruit bunch palm oil
waste has been successfully completed. Furthermore, AEG has had
approaches from and is actively working with government bodies, who
are taking an increasing interest in AEG's knowledge and
experience, and the Group is actively working with local commercial
partners in the region. The Board hopes for a commercial milestone
as soon as practicable.
PeatSwitch(TM)
During the development of the CoalSwitch(TM) technology, AEG's
scientists identified that the technology can also be reconfigured
to produce an enhanced soil replacement product from waste fibre.
This substrate can be easily adjusted and tailored to meet the
specific requirements of an individual agricultural customer and
more importantly specific plant type or species.
On 11 June 2018, the Group announced that it had entered into a
Memorandum of Understanding with Young Living Farms ("YLF"),
pursuant to which YLF would become the first buyer of a PeatSwitch
plant, utilising components of the Reference Plant. However, this
did not result in a definitive commercial contract due to internal
strategic reviews at YLF. In the light of this AEG is currently
considering the commercial opportunities with this product.
Timberlands
Overview
The mission of the Timberlands business is to identify, develop
and manage forestry projects. This business has multiple benefits
and advantages to AEG and the forestry owners, including, among
others:
-- Security and traceability of feedstock for CoalSwitch(TM)
production plants located at these sites.
-- Using timber in CoalSwitch(TM) technology optimises output
and value, as wood, which is traditionally seen as waste, can be
processed in CoalSwitch(TM) plants to produce value.
-- An opportunity to secure long-term timber proprietary tenures
should allow AEG to enter into significant and long-term supply
agreements for its products with a lesser risk of market price
fluctuations and the opportunity to increase profitability of the
CoalSwitch(TM) product.
-- Control of the supply chain ensures co-ordinated environmental sustainability.
Newfoundland
On 26 November 2018, and following many months of work and
negotiation, AEG announced that its subsidiary, Timberlands
International Limited through its local operating company
Timberlands International (Newfoundland and Labrador) Inc, had been
formally issued two five-year Commercial Timber Permits ('CTPs')
for Forestry Management Areas 17 and 18 by the Ministry of
Fisheries and Land Resources of the Crown Province of Newfoundland
and Labrador.
The CTPs were issued with a five-year revolving renewal facility
relating to a total Annual Allowable Cut of 100,000 cubic metres
per annum. In addition, the CTPs specify certain standard
conditions including the species, class and volume of timber that
may be cut and the locations from where such timber may be cut.
The Group is currently reviewing the optimal commercial strategy
to develop its opportunities in Newfoundland. Recent conversations
have presented complementary business opportunities for the Group,
in additions to the CTPs. These are being examined with the aim to
construct and install a CoalSwitch(TM) plant in the Province.
Alberta
AEG is continuing to consider various commercial opportunities
in Alberta. On 17 May 2018, AEG announced an MoU with Powerwood
Canada ("Powerwood") which, subject to formal contract and
available funding, would allow AEG to assume a controlling interest
in Powerwood. Powerwood has access to a number of forestry assets
granted by the Crown in the name of the Province of Alberta.
Commercial conversations have continued between the parties but at
this time, there is no immediate prospect of a transaction.
In addition, AEG has continued to maintain an ongoing
relationship with the Métis Settlements General Council under the
stewardship of Metis Settlements General Council President Gerald
Cunningham.
Finally, in recent weeks, AEG has been approached by commercial
partners, who may wish to acquire a territorial licence to develop
CoalSwitch(TM) in Alberta.
AEG is examining various solutions to realise value and see the
commencement of operations in Alberta and will provide the market
with a further update as soon as practicable.
Ukraine
Whilst AEG has no current active business activities in Ukraine
at this time, the Group retains its supply contract granted by the
Lyubomi Forestry, which is the administrator of the Lyubomi Forest
in the Ukraine. Following the extension of the contract term during
the 2014, the remaining useful life on contractual relationships is
45 years. AEG is currently reviewing options to utilise this asset
to provide feedstock to future CoalSwitch(TM) operations including
AEG's proposed activities in Poland.
Enquiries & Further Information:
Website LinkedIn
www.aegplc.com www.linkedin.com/company/activeenergy
--------------------------------------
Enquiries
Active Energy Group Michael Rowan C/O SBP
Plc Chief Executive Officer (Active +44 (0) 20 7236 1177
Energy)
Antonio Esposito
Chief Operations Officer
(Active Energy)
--------------------------------- ----------------------------
SP Angel Corporate David Hignell / Lindsay Mair Office: +44 (0)20
Finance LLP / Jamie Spotswood 3470 0470
Nominated Adviser
and Broker
--------------------------------- ----------------------------
St Brides Partners Melissa Hancock / Gaby Jenner info@stbridespartners.co.uk
Financial PR Adviser Office: +44 (0) 20
7236 1177
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CONSOLIDATED STATEMENT OF INCOMEAND OTHER COMPREHENSIVE
INCOME
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Note US$ US$
REVENUE FROM CONTRACTS WITH CUSTOMERS 3 195,000 -
GROSS PROFIT 195,000 -
R&D expenditure - (2,389,807)
Impairment charge (950,700) -
Administrative expenses 5 (2,982,866) (2,870,721)
------------ -------------
OPERATING LOSS (3,738,566) (5,260,528)
Finance costs 6 (406,929) (3,031,054)
------------ -------------
(Loss) from continuing operations (4,145,495) (8,291,582)
Income tax credit on continuing
operations 8 1,346,010 355,491
(Loss) from discontinued operations 7 (386,994) (7,284,981)
------------ -------------
LOSS FOR THE PERIOD (3,186,479) (15,221,072)
(Profit)/Loss attributable to Non--controlling
Interest (69,625) 437,110
------------ -------------
(Loss) attributable to the Parent
Company (3,256,104) (14,783,962)
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation
of operations (278,237) 137,734
Revaluation of assets held for
resale (34,658) 331,585
------------ -------------
Total other comprehensive expense (312,895) 469,319
------------ -------------
TOTAL COMPREHENSIVE LOSS FOR THE
PERIOD (3,568,999) (14,314,643)
============ =============
(Loss) per share (US cent) - continuing
operations (0.28) (0.90)
(Loss) per share (US cent) - discontinued
operations (0.04) (0.88)
------------ -------------
Basic and Diluted (loss) per share
(US cent) 9 (0.32) (1.78)
------------ -------------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent Company income
statement.
The notes below form part of these financial statements.
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018
Group Group Company Company
2018 2017 2018 2017
Note US$ US$ US$ US$
NON-CURRENT ASSETS
Intangible assets 10 8,459,850 8,054,947 - -
Property, plant and equipment 11 5,375,888 3,791,611 - -
Investment in subsidiaries 12 - - 58,426 58,427
Long term loans 14 - - 17,372,234 -
Available for sale financial
assets 15 752,215 786,873 752,215 786,873
-------------
14,587,953 12,633,431 18,182,875 845,300
------------- ------------- ------------- -------------
CURRENT ASSETS
Inventory 16 - 20,349 - -
Trade and other receivables 17 1,704,410 517,902 784,268 13,772,668
Cash and cash equivalents 18 298,768 142,049 234 135,706
------------- ------------- -------------
2,003,178 680,300 784,502 13,908,374
------------- ------------- ------------- -------------
TOTAL ASSETS 16,591,131 13,313,731 18,967,377 14,753,674
============= ============= ============= =============
CURRENT LIABILITIES
Trade and other payables 19 2,851,693 1,944,676 1,469,614 1,122,458
Loans and borrowings 22 1,327,707 - 1,000,000 -
Finance leases falling
due in less than one
year 21 - 89,607 - -
------------- ------------- ------------- -------------
4,179,400 2,034,283 2,469,614 1,122,458
------------- ------------- ------------- -------------
NON-CURRENT LIABILITIES
Deferred income tax liabilities 20 241,585 384,169 - -
Finance leases falling
due in more than one
year 21 - 205,993 - -
Loans and borrowings 22 11,672,738 13,224,252 11,672,738 13,224,252
------------- ------------- -------------
11,914,323 13,814,414 11,672,738 13,224,252
------------- ------------- ------------- -------------
TOTAL LIABILITIES 16,093,723 15,848,697 14,142,352 14,346,710
------------- ------------- ------------- -------------
NET ASSETS 497,408 (2,534,966) 4,825,025 406,964
============= ============= ============= =============
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Share capital 23 17,265,379 14,493,246 17,265,379 14,493,246
Share premium 17,303,159 14,740,478 17,303,159 14,740,478
Merger reserve 2,350,175 2,350,175 2,350,175 2,350,175
Foreign exchange reserve (204,815) 108,080 (716,115) (403,220)
Own shares held reserve (268,442) (779,222) (268,442) (779,222)
Convertible debt / warrant
reserve 2,720,933 2,930,209 2,720,933 2,930,209
Retained earnings (38,310,938) (35,950,264) (33,830,064) (32,924,702)
Non--controlling Interest (358,043) (427,668) - -
------------- ------------- ------------- -------------
TOTAL EQUITY 497,408 (2,534,966) 4,825,025 406,964
============= ============= ============= =============
The financial statements were approved and authorised for issue
by the Directors on 26 June 2019 and were signed on their behalf
by:
Michael Rowan
Chief Executive Officer
Company Number 03148295
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2018
Group Group Company Company
Note 2018 2017 2018 2017
US$ US$ US$ US$
Cash (outflow)/inflow
from operations 26 (1,515,299) (5,821,095) (4,242,757) (13,717,090)
Income tax paid - (6,684) - -
------------ ------------ ------------ -------------
Net cash (outflow)/inflow
from operating activities (1,515,299) (5,827,779) (4,242,757) (13,717,090)
Cash flows from investing
activities
Purchase of intangible
assets (1,108,770) (1,438,017) - -
Acquisition of investment - - - (58,427)
Purchase of property,
plant and equipment (1,777,388) (3,923,481) - -
Sale of property,
plant and equipment 123,222 221,504 - -
------------ ------------ ------------ -------------
Net cash outflow from
investing activities (2,762,936) (5,139,994) - (58,427)
Cash flows from financing
activities
Issue of equity share
capital, net of share
issue costs 3,299,248 3,142,674 3,299,247 3,142,674
Loans raised 2,350,445 7,537,671 2,022,738 10,181,201
Finance expenses (1,193,316) (1,693,031) (1,193,316) (1,454,191)
------------ ------------ ------------ -------------
Net cash inflow from
financing activities 4,456,377 8,987,314 4,128,669 11,869,684
------------ ------------ ------------ -------------
Net increase/(decrease)
in cash and cash equivalents 178,142 (1,980,459) (114,088) (1,905,833)
Cash and cash equivalents
at beginning of the
year 142,049 2,121,841 135,706 2,041,134
Exchange (losses)/gains
on cash and cash equivalents (21,423) 667 (21,384) 405
------------ ------------ ------------ -------------
Cash and cash equivalents
at end of the year 18 298,768 142,049 234 135,706
============ ============ ============ =============
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Own Convertible Non-controlling
Foreign shares debt and Interest
Share Share Merger exchange held warrant Retained
capital premium reserve reserve reserve reserve earnings Total equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
At 31 December
2016 12,621,134 13,469,916 2,350,175 (29,654) (779,222) 1,075,301 (21,805,636) - 6,902,014
Loss for the
year - - - - - - (15,221,072) - (15,221,072)
Other
comprehensive
income - - - 137,734 - - 331,585 - 469,319
Issue of share
capital 1,872,112 1,270,562 - - - - - - 3,142,674
Embedded
derivative
on issue of
CLN - - - - - 1,854,908 - - 1,854,908
Share based
payments - - - - - - 307,749 - 307,749
Minority
Interest - - - - - - 437,110 (427,668) 9,442
At 31 December
2017 14,493,246 14,740,478 2,350,175 108,080 (779,222) 2,930,209 (35,950,264) (427,668) (2,534,966)
Loss for the
period - - - - - - (3,186,479) - (3,186,479)
Other
comprehensive
income - - - (312,895) - - - (312,895)
CLN
conversions 734,267 1,812,079 - - (339,081) - - 2,207,265
Issue of share
capital 2,548,646 750,602 - - - - - - 3,299,248
Embedded
derivative
on CLN issue - - - - - 129,805 - - 129,805
Share based
payments - - - - - - 895,430 - 895,430
Cancellation
of Treasury
shares (510,780) - - - 510,780 - - - -
Minority
Interest - - - - - - (69,625) 69,625 -
At 31 December
2018 17,265,379 17,303,159 2,350,175 (204,815) (268,442) 2,720,933 (38,310,938) (358,043) 497,408
=========== =========== ========== ========== ========== ============ ============= ================ =============
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2018
Own Convertible
Foreign shares debt and
Share Share Merger exchange held warrant Retained
capital premium reserve reserve reserve reserve earnings Total equity
US$ US$ US$ US$ US$ US$ US$ US$
At 31 December
2016 12,621,134 13,469,916 2,350,175 (1,023,565) (779,222) 1,075,301 (22,345,436) 5,368,303
Loss for the
year - - - - - - (11,218,600) (11,218,600)
Other
comprehensive
income - - - 620,345 - - 331,585 951,930
Issue of share
capital 1,872,112 1,270,562 - - - - - 3,142,674
Embedded
derivative on
issue
of CLN - - - - - 1,854,908 - 1,854,908
Share based
payments - - - - - - 307,749 307,749
At 31 December
2017 14,493,246 14,740,478 2,350,175 (403,220) (779,222) 2,930,209 (32,924,702) 406,964
Loss for the
period - - - - - - (1,800,792) (1,800,792)
Other
comprehensive
income - - - (312,895) - - - (312,895)
CLN
conversions 734,267 1,812,079 - - - (339,081) - 2,207,265
Issue of share
capital 2,548,646 750,602 - - - - - 3,299,248
Embedded
derivative on
CLN
issue - - - - - 129,805 - 129,805
Share based
payments - - - - - - 895,430 895,430
Cancellation
of Treasury
shares (510,780) - - - 510,780 - - -
At 31 December
2018 17,265,379 17,303,159 2,350,175 (716,115) (268,442) 2,720,933 (33,830,064) 4,825,025
=========== =========== ========== ============ ========== ============ ============= =============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a company incorporated in England and
Wales and quoted on the AIM market of the London Stock Exchange.
The address of the registered office is disclosed on page 1 of the
Company's 2018 annual report. The principal activity of the Group
is described in the Strategic Report.
Basis of preparation
The principal accounting policies adopted in preparation of the
financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
Both the Company financial statements and the Group financial
statements have been prepared and approved by the Directors in
accordance with International Financial Reporting Standards,
International Accounting Standards and IFRIC interpretations
(collectively IFRS) as adopted by the European Union, and with
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The consolidated financial statements have
been prepared on the historical cost basis, as modified by the
revaluation of property, plant and equipment, available for sale
financial assets, and financial assets and liabilities, including
derivative financial instruments, at fair value through profit or
loss.
The preparation of financial statements in compliance with IFRS
requires the use of certain critical accounting estimates. It also
requires Group management to exercise judgment in the most
appropriate application in applying the Group's accounting
policies. The areas where significant judgments and estimates have
been made in preparing the financial statements and their effect
are disclosed in note 29.
Going concern
Historically, the Group's primary revenue generating business
segment was the Ukrainian wood fibre business. This was
discontinued during 2017 and since then the group has focused its
efforts on the CoalSwitch(TM) business segment. This business
segment had not generated significant revenues at the date of
signing these financial statements.
The Directors have considered the cash requirements of the
business for the following 12 months. As part of this process, they
have taken into account existing liabilities, along with detailed
operating cash flow requirements. The projections prepared include
ongoing running costs of the Group and committed expenditure at the
date of approving the financial statements.
The Directors note that the current operational plans involve
commencement of production and sale of CoalSwitch(TM) and other
biomass products in the second half of 2019. In addition the
Directors have identified a variety of potential sources of funds
including issue of additional equity and/or debt, tax credits,
rental income, government subsidies and sale of investments. In
addition, the Directors have identified additional cost reductions
which may be implemented if necessary.
Taking this into account and following a detailed review by the
Directors of the Group's cash flow requirements, the directors
believe that the Group will have sufficient cash resources to
continue to trade for a period of at least 12 months from the date
that the financial statements are signed. Consequently, the
financial statements have been prepared on a going concern
basis.
However, as of the date of signing these financial statements,
production and sale of CoalSwitch(TM) has not commenced and not all
of the potential sources of funds have been finalised and therefore
there can be no guarantee that sufficient funds will be received to
secure the future of the group. These circumstances indicate the
existence of a material uncertainty which may cast significant
doubt on the Company's ability to continue as a going concern.
Standards, interpretations and amendments to existing
standards
The following Adopted IFRSs have been issued but have not been
applied by the Group in these Financial Statements. The full impact
of their adoption has not yet been fully assessed; however,
management do not expect the changes to have a material effect on
the Financial Statements unless otherwise indicated:
-- Annual Improvements to IFRSs - 2015-2017 Cycle (1 January 2019)
-- Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2019)
-- Amendments to IAS 19 - employees benefits plan amendments, curtailments or settlements
-- Amendments to IAS 28 on long term interests in associates and joint ventures
-- Amendments to IFRS 3 "Business combinations" on definition of a business
-- Amendments to IFRS 9, financial instruments on prepayment features with negative compensation
-- IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (effective date to be confirmed)
-- Amendments to IAS 40 Investment Property (effective date to be confirmed)
-- IFRIC 23 Uncertainty over Income Tax Treatments (1 January 2019)
-- Amendments to IAS 28 Investments in Associates and Joint
Ventures (effective date to be confirmed)
-- IFRS 17 Insurance contracts (1 January 2021)
Changes in accounting standards: Standards which have been
implemented in the year
IFRS 9 'Financial Instruments': The standard replaces all phases
of the financial instruments project and IAS 39 'Financial
Instruments: Recognition and Measurement'. The standard is
effective from periods beginning on or after January 2018 and
introduces:
-- new requirements for the classification and measurement of
financial assets and financial Liabilities; and,
-- a new model for recognising provisions based on expected credit Losses.
IFRS 15 'Revenue from Contracts with Customers': IFRS 15
replaced IAS 18 'Revenue' and IAS 11 'Construction Contracts' for
accounting periods commencing on or after 1 January 2018. The core
principle of the standard is that an entity will recognise revenue
at an amount that reflects the consideration to which the entity
expects to be entitled in exchange for transferring promised goods
or services to a customer.
The impact of IFRS 9 & 15 has been assessed at a Group
level, and there is no material impact on the consolidated results
of the Group.
Basis of consolidation
The financial information incorporates the results of the
Company and entities controlled by the Company (its subsidiaries).
Control is achieved when the Group has power over relevant
activities, is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. The consolidated
financial statements present the financial results of the Company
and its subsidiaries (the Group) as if they formed a single entity.
Where necessary, adjustments are made to the results of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intra-Group transactions, balances,
income and expenses are eliminated on consolidation.
In the Company's statement of financial position, investments in
subsidiaries are stated at cost less provisions for any permanent
diminution in value.
Revenue recognition
Revenue is recognised in according with the requirements of IFRS
15 'Revenue from Contracts with Customers'. The Company recognises
revenue to depict the transfer of promised goods and services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. This core principle is delivered in a five-step model
framework:1. Identify the contract(s) with the customer; 2.
Identify the performance obligations in the contract; 3. Determine
the transaction price; 4. Allocate the transaction price to the
performance obligations in the contract; and 5. Recognise revenue
when (or as) the entity satisfy a performance obligation.
Revenue is recognised when control of the products have been
transferred to the customer. Control is considered to have
transferred once products have been received by the customer unless
shipping terms dictate otherwise. Revenues exclude intra-group
sales and value added taxes and represent net invoice value less
estimated rebates, returns and settlement discounts. The net
invoice value is measured by reference to the fair value of
consideration received or receivable by the Group for goods
supplied.
Goodwill and business combinations
On acquisition, the assets and liabilities and contingent
liabilities of subsidiaries are measured at their fair values at
the date of acquisition. Any excess of cost of acquisition over the
fair values of the identifiable net assets acquired is recognised
as goodwill. Any deficiency of the cost of acquisition below the
fair values of the identifiable net assets acquired (i.e. discount
on acquisition) is credited to the income statement in the period
of acquisition.
When the consideration transferred by the Group in a business
combination includes assets or liabilities from a contingent
consideration arrangement, the contingent consideration is measured
at its acquisition date fair value and included as part of the
consideration paid. Changes in the fair value of the consideration
that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against
goodwill.
Goodwill arising on consolidation is recognised as an intangible
asset and reviewed for impairment at least annually by comparing
the carrying value of the asset to the recoverable amount. Any
impairment is recognised immediately in profit or loss and is not
subsequently reversed.
Associates
Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially
recognised in the consolidated statement of financial position at
cost. Subsequently associates are accounted for using the equity
method, where the Group's share of post-acquisition profits and
losses and other comprehensive income is recognised in the
consolidated statement of profit and loss and other comprehensive
income (except for losses in excess of the Group's investment in
the associate unless there is an obligation to make good those
losses).
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the
Group's share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the
carrying amount of the associate. Where there is objective evidence
that the investment in an associate has been impaired the carrying
amount of the investment is tested for impairment in the same way
as other non-financial assets.
Joint arrangements
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the joint venture. The investor's share in
the Joint Venture profits and losses resulting from these
transactions is eliminated against the carrying value of the Joint
Venture. Any premium paid for an investment in a joint venture
above the fair value of the Group's share of the identifiable
assets, liabilities and contingent liabilities acquired is
capitalised and included in the carrying amount of the investment
in joint venture. Where there is objective evidence that the
investment in a joint venture has been impaired the carrying amount
of the investment is tested for impairment in the same way as other
non-financial assets.
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues and expenses
in accordance with its contractually conferred rights and
obligations.
Impairment of non-financial assets (excluding inventories,
investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
("CGUs"). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill. Impairment charges are
included in profit or loss, except to the extent they reverse gains
previously recognised in other comprehensive income. An impairment
loss recognised for goodwill is not reversed.
Intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised on a straight-line basis over
their useful economic lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques (see note
29 related to critical estimates and judgements below).
Internally generated intangible fixed assets are recognised if
they meet the requirements set out by international accounting
standards. Specifically,
-- the asset must be separately identifiable that is to say that
either it is capable of being separated or divided from the entity
and sold, transferred, licensed, rented or exchanged; or it arises
from contractual or other legal rights, regardless of whether those
rights are transferable or separable from the entity or from other
rights and obligations.
-- The cost of the asset can be measured reliably;
-- the technical feasibility of completing the intangible asset;
-- the Group intends and is able to complete the intangible asset and use or sell it;
-- the intangible asset will generate probable future economic benefits;
-- there are available and adequate technical, financial and
other resources to complete and to use or sell the intangible
asset.
-- Expenditure attributable to the intangible asset is measurable.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used to determine the cost of
intangibles acquired in a business combination are disclosed in
note 10 below.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost
less accumulated depreciation and any recognised impairment loss.
Cost includes the purchase price and all directly attributable
costs. Depreciation is provided at the following annual rates in
order to write off each asset over its estimated useful life.
Plant and equipment - 2 to 10 years straight line
Furniture and office equipment - 2 to 5 years straight line
The assets residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost is determined
using the first-in, first-out (FIFO) method. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary
course of business, less applicable selling expenses.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including Executive Directors.
Financial assets and liabilities
The Group classifies its financial assets at inception into
three measurement categories; 'amortised cost', 'fair value through
other comprehensive income' ('FVOCI') and 'fair value through
profit and loss' ('FVTPL'). The Group classifies its financial
liabilities, other than financial guarantees and loan commitments,
as measured at amortised cost. Management determines the
classification of its investments at initial recognition. A
financial asset or financial liability is measured initially at
fair value. At inception transaction cost that are directly
attributable to its acquisition or issue, for an item not at fair
value through profit or loss, is added to the fair value of the
financial asset and deducted from the fair value of the financial
liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or liability is measured
at initial recognition, minus principal payments, plus or minus the
cumulative amortisation using the effective interest method of any
difference between the initial amount recognised and maturity
amount, minus any reduction for impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction on the measurement date. The fair value
of assets and liabilities in active markets are based on current
bid and offer prices respectively. If the market is not active the
group establishes fair value by using appropriate valuation
techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially
the same for which market observable prices exist, net present
value and discounted cash flow analysis.
Derecognition
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or where the
group has transferred substantially all of the risks and rewards of
ownership. In transaction in which the group neither retains nor
transfers substantially all the risks and rewards of ownership of a
financial asset and it retains control over the asset, the group
continues to recognise the asset to the extent of its continuing
involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset. There have not been
any instances where assets have only been partly derecognised. The
group derecognises a financial liability when its contractual
obligations are discharged, cancelled or expire.
Impairment
The Group assesses at each financial position date whether there
is objective evidence that a financial asset or group of financial
assets is impaired. If there is objective experience (such as
significant financial difficulty of obligor, breach of contract, or
it becomes probable that debtor will enter bankruptcy), the asset
is tested for impairment. The amount of the loss is measured as the
difference between the asset's carrying amount and the present
value of the estimated future cash flows (excluding future expected
credit losses that have not been incurred) discounted at the
financial asset's original effective interest rate (that is, the
effective interest rate computed at initial recognition).The
carrying amount of the asset is reduced through use of an allowance
account. The amount of loss is recognised in the Statement of
Comprehensive Income.
Taxation
Current taxes are based on the results shown in the financial
statements and are calculated according to local tax rules, using
tax rates enacted or substantively enacted by the year-end
date.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available to utilise the difference. The amount of the asset or
liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to
apply when the deferred tax liabilities/assets are
settled/recovered.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different Group entities which intend either to settle
current tax assets/liabilities on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets or
liabilities are expected to be settled/recovered.
Foreign currencies
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which they operate (their "functional
currency"). The Company and Consolidated financial statements are
presented in United States Dollar ("US Dollar", "US$"), which is
the Group's presentation currency as the Group's activities are
ultimately linked to the US Dollar. The Company's functional
currency is Pound Sterling.
Transactions entered into by Group entities in a currency other
than their functional currency are recorded at the rates ruling
when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting
date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
On consolidation, the results of overseas operations are
translated into the Group's presentation currency, US Dollars, at
rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations, including
goodwill arising on the acquisition of those operations, are
translated at the rate ruling at the reporting date. Differences
arising on translating the opening net assets at opening rate and
the results of overseas operations at actual rate are recognised in
other comprehensive income and accumulated in the foreign exchange
reserve. Exchange differences recognised in the statement of
comprehensive income of Group entities' separate financial
statements on the translation of long-term monetary items forming
part of the Group's net investment in the overseas operation
concerned are reclassified to the foreign exchange reserve on
consolidation. On disposal of a foreign operation, the cumulative
exchange differences recognised in the foreign exchange reserve
relating to that operation up to the date of disposal are
transferred to the consolidated statement of comprehensive income
as part of the profit or loss on disposal.
Convertible debt
The proceeds received on issue of the Group's convertible debt
are allocated into their liability and equity components. The
amount initially attributed to the debt component equals the
discounted cash flows using a market rate of interest that would be
payable on a similar debt instrument that does not include an
option to convert. Subsequently, the debt component is accounted
for as a financial liability measured at amortised cost until
extinguished on conversion or maturity of the bond. The remainder
of the proceeds are allocated to the conversion option and are
recognised in the "Convertible debt reserve" within shareholders'
equity, net of income tax effects.
Where the proceeds from the convertible debt have been used to
finance construction of property, plant and equipment, or to invest
in intangible assets, then the associated borrowing costs are
allocated to the relevant asset in accordance with the requirements
of IAS23.
Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the Group (a
"finance lease"), the asset is treated as if it had been purchased
outright. The amount initially recognised as an asset is the lower
of the fair value of the leased property and the present value of
the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between capital and interest.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an "operating lease"),
the total rentals payable under the lease are charged to the
consolidated income statement on a straight-line basis over the
lease term.
Share based payments
Where employees receive remuneration in the form of shares or
share options, the fair value of the share-based employee
compensation arrangement at the date of the grant is recognised as
an employee benefit expense in the consolidated income statement.
The total expense to be apportioned over the vesting period of the
benefit is determined by reference to the fair value (excluding the
effect of non-market-based vesting conditions) at the date of the
grant. The assumptions underlying the number of awards expected to
vest are subsequently adjusted for the effects of non-market-based
vesting to reflect the conditions prevailing at the year-end date.
Fair value is measured by the use of a Monte Carlo (JSOP options)
or Black Scholes (other options) simulations. The expected life
used in the model has been adjusted, based on management's best
estimate, for the effects of the non-transferability, exercise
restrictions and behavioural considerations.
Where equity instruments are granted to persons other than
employees, the consolidated income statement is charged with the
fair value of goods and services received; except where that fair
value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at
the date the entity obtains the goods or the counterparty renders
the service.
Own shares held
Consideration paid/received for the purchase/sale of shares held
in escrow or in trust for the benefit of employees is recognised
directly in equity. The nominal value of such shares held is
presented within the "own shares held" reserve. Any excess of the
consideration received on the sale of the shares over the weighted
average cost of the shares sold is credited to retained
earnings.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group consolidated income
statement.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision
for impairment in the Company financial statements.
2. SEGMENTAL INFORMATION
The Group reports two operating continuing business
segments:
-- "Forestry & Natural Resources" denotes the Group's
initiatives to secure ownership of the entire timber supply chain
from forest to finished product
-- "CoalSwitch(TM)/PeatSwitch(TM) denotes the Group's renewable
wood pellet and soil replacement business.
Revenues and costs associated with the Ukrainian Wood Fibre
business were reclassified as discontinued operations in 2017.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that offer different products. During the business development
stage they are managed separately because each business operates in
different markets and locations. In future it is likely that these
business segments may be combined into single operations and
reporting structures will be revisited accordingly.
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with IFRS but
excluding corporate overheads, non-recurring losses, such as
goodwill impairment, the effects of share-based payments, and joint
venture profit and losses.
2018 2018 2018
Forestry
& Natural CoalSwitch(TM)/
Resources PeatSwitch(TM) Total
US$ US$ US$
Total Revenue - 195,000 195,000
Operating segment (loss) (995,545) (407,323) (1,402,868)
Segment (loss) before tax (995,545) (407,323) (1,402,868)
Tax charge 142,584 1,203,426 1,346,010
----------- ---------------- ------------
Segment (loss) for the
year (852,961) 796,103 (56,858)
=========== ================ ============
2017 2017 2017
Forestry
& Natural CoalSwitch(TM)/
Resources PeatSwitch(TM) Total
US$ US$ US$
Total Revenue - - -
Operating segment (loss) - (3,260,588) (3,260,588)
Segment (loss) before tax - (3,260,588) (3,260,588)
Tax charge - 346,522 346,522
-----------
Segment (loss) for the
year - (2,914,066) (2,914,066)
=========== ================ ============
Profits and losses associated with the Ukrainian wood fibre
business were reclassified as discontinuing in 2017 and have
therefore be excluded from the above analysis. All other finance
costs relate to Group funding and are not allocated to an
individual segment.
Capital expenditure relating to the
CoalSwitch(TM)/PeatSwitch(TM) segment was US$2,666,222 (2017:
US$3,877,226) and capital expenditure relating to the Forestry and
natural resource segment was US$804,103 (2017: US$896,957).
Reconciliation of reportable segment profit or loss, assets and
liabilities to the Group's corresponding amounts are as
follows:
2018 2017
US$ US$
Total (loss) from reportable segments (56,858) (2,914,066)
Unallocated amount - corporate expenses (1,440,268) (1,683,222)
Unallocated amount - finance income - -
Unallocated amount - finance expense (406,929) (3,031,054)
Share based payments (895,430) (307,749)
Discontinued operations (386,994) (7,284,981)
Loss for the period (3,186,479) (15,221,072)
============ =============
An analysis of non-current assets by location of assets is given
below:
2018 2017
US$ US$
United Kingdom 5,303,081 4,741,653
Ukraine 1,267,925 2,170,583
Canada 2,701,058 2,179,584
United States 5,315,889 3,541,611
----------- -----------
14,587,953 12,633,431
=========== ===========
2. REVENUE
All revenues in 2017 relating to the Ukrainian wood fibre
business (shown below as sale of goods) have been reclassified as
discontinued and therefore are not shown on the face of the income
statement.
2018 2017
Group US$ US$
Sale of goods - 1,323,200
Engineering services 195,000 -
-------- ----------
195,000 1,323,200
======== ==========
The following table analyses revenue by location of customer.
Revenues in 2017 relate to the Ukrainian wood fibre business and
was therefore reclassified as discontinued in the 2017 financial
statements.
2018 2017
US$ US$
Switzerland 25,000 -
USA 170,000 -
Turkey - 856,869
Ukraine - 466,331
-------- ----------
195,000 1,323,200
======== ==========
Revenue derived from a single external customer amounted to
US$170,000 (2017: US$856,869).
3. EMPLOYEE COSTS AND DIRECTORS
The following table analyses group wages and salaries before any
allocations to property, plant and equipment or intangible
assets.
2018 2017
Group US$ US$
Wages and salaries 2,021,959 2,068,200
Social security costs 177,463 183,631
---------- ----------
2,199,422 2,251,831
Share based payments - others 37,920 59,240
Share based payments - directors 857,510 248,509
---------- ----------
3,094,852 2,559,580
========== ==========
The average monthly number of employees during the year was as
follows:
2018 2017
Directors 3 3
Administration 6 11
Production 10 25
----- -----
19 39
===== =====
Directors' and key management personnel remuneration
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. During the period these were considered to
be the Directors of the Company listed on page 16 of the Company's
2018 Annual Report.
2018 2017
US$ US$
Directors' emoluments 434,957 719,293
Share based payments (note 24) 857,510 248,509
---------- --------
1,292,467 967,802
========== ========
The emoluments of the highest paid Director for the year,
excluding non-cash share based payments, were US$193,295 (2017:
US$255,879).
4. OPERATING LOSS
Group 2018 2017
The loss before income tax is stated after charging/(crediting): US$ US$
Operating leases - premises 33,596 26,807
Operating leases - vehicles - 2,886
Operating leases - equipment - 29,045
Amortisation of intangible assets 44,845 44,845
Depreciation and impairment 950,700 280,473
Loss / (profit) on disposal of fixed assets/discontinued
operations 1,778 5,600,464
Auditors' remuneration - parent company and consolidation 40,830 34,000
Auditors' remuneration - subsidiaries 23,605 20,500
Auditors' remuneration - taxation services 4,466 9,400
Auditors' remuneration - other services 14,035 -
Share based payments 895,430 307,749
Foreign exchange (gains)/loss (640,353) (754,703)
========== ==========
5. FINANCE INCOME AND COSTS
2018 2017
Group US$ US$
Finance costs
Interest on convertible loan 1,003,213 958,299
Other loan interest and charges 44,070 929,083
Foreign exchange losses (640,354) 1,143,672
---------- ----------
Net finance (credit)/costs 406,929 3,031,054
========== ==========
Foreign exchanges movements primarily relate to movements in
US$/Sterling exchange rates and resulting movements in intercompany
balances.
6. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in
Ukraine. The results of this business are disclosed as a single
line item in the Group Income and Expenditure Statement in
accordance with IRFS5. Details of the results of these operations
are shown below.
2018 2017
US$ US$
REVENUE - 1,323,200
Cost of sales (265,006) (2,925,138)
---------- ------------
GROSS PROFIT (265,006) (1,601,938)
Administrative expenses (120,210) (719,519)
---------- ------------
OPERATING (LOSS)/PROFIT (385,216) (2,321,457)
Finance income - 641,126
(Loss)/profit for the Period (385,216) (1,680,331)
Loss on sale of discontinued
operations (1,778) (5,600,464)
Income tax - (4,186)
---------- ------------
(Loss)/profit attributable to the Parent Company (386,994) (7,284,981)
========== ============
Discontinued operations cashflows from operating activities were
US$1,135,216 outflow (2017: US$124,081 outflow); cash flows from
investing activities were US$123,222 inflow (2017: US$221,504
inflow); and cashflows arising from financing activities were
US$200,000 (2017: US$nil).
8. TAXATION
2018 2017
Group US$ US$
Current tax
Overseas tax charge on discontinued operations - 4,187
R&D tax credit (1,203,426) (346,522)
Deferred tax
Reversal of temporary differences (142,584) (8,969)
Total income tax (credit)/charge (1,346,010) (351,304)
============ ==========
Breakdown between continuing and discontinuing
operations
Tax charge relating to discontinued operations - 4,187
Tax (credit)/charge relating to continued
operations (1,346,010) (355,491)
(1,346,010) (351,304)
============ ==========
Factors affecting the tax charge
The tax on the Group assessed for the year is higher than the
standard rate of corporation tax in the UK. The difference is
explained below:
2018 2017
US$ US$
Loss before income tax (4,532,489) (15,572,377)
Standard rate of corporation tax 19% 19.25%
Loss before tax multiplied by standard rate
of corporation tax (861,173) (2,997,683)
Effects of:
R&D tax credit rate (1,203,426) 113,516
Non-deductible expenses 187,707 1,553,856
Overseas tax rate difference from UK rate (25) 4,883
Income not taxable (81,940) (264,739)
Accelerated depreciation - 15,839
Revenue items capitalised (110,991) -
Losses carried forward 723,838 1,223,022
Current tax (credit)/charge (1,346,010) (351,306)
============ =============
Tax charge relating to discontinued operations 4,187
Tax (credit) relating to continued operations (1,346,010) (355,491)
============ =============
The Finance Act 2017 confirmed that the main rate of corporation
tax, which applies to most companies subject to UK tax, will be
reduced from the 19% rate applying from 1 April 2017 to 17% from 1
April 2020.
Movements in the groups tax loss position can be summarised as
follows:
US$
Tax losses brought forward at 1 January 2018 22,614,986
Adjusted Loss per A/c's 4,668,938
Surrendered for R&D tax credit (8,299,489)
Tax losses carried forward at 31 December 2018 18,984,435
=====================
This equates to a potential deferred tax asset at 17% of
US$3,227,354 at the year-end 2018 (2017: US$$4,296,847), which has
not been recognised due to uncertainties regarding the
recoverability of this balance.
Tax effects of amounts which are not deductible/(taxable) in
calculating taxable income are as follows:
2018 2017
US$ US$
Intercompany loan written off - 399,295
Loss on disposal of investments - 184,206
Impairment of investment - 848,402
Share based payments 170,132 59,242
Legal and professional fees 14,804 70,556
Revaluation of assets held for sale - 63,830
Revaluation gains - (62,937)
Investor relations 2,470 -
Sundry items 301 (8,738)
187,707 1,553,856
======== ==========
9. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the
loss attributable to equity holders of the company of US$3,256,104
(2017: US$14,783,962) by the weighted average number of Ordinary
Shares in issue during the year, excluding own shares held, of
1,013,575,699 (2017: 829,908,445).
At 31 December 2018, there were no own shares held
(2017:33,212,841) Ordinary Shares. The weighted average number of
own shares held by the company during the year are not included in
the weighted average Ordinary Shares in issue during the financial
year.
10. INTANGIBLE ASSETS
Other intellectual
Group Goodwill property Development Total
US$ US$ US$ US$
Cost
At 31 December 2016 2,212,930 2,746,747 2,936,252 7,895,929
Additions - 541,060 896,957 1,438,017
Disposals (2,212,930) - - (2,212,930)
Costs incurred by JV partner - 1,911,121 - 1,911,121
Transfers from investment
in associate - - 1,282,627 1,282,627
R&D costs transferred to
income statement - (1,244,045) - (1,244,045)
------------ ------------------- ------------ --------------
At 31 December 2017 - 3,954,883 5,115,836 9,070,719
Additions 596,345 804,103 1,400,448
------------ ------------------- ------------ --------------
At 31 December 2018 - 4,551,228 5,919,939 10,471,167
============ =================== ============ ==============
Accumulated amortisation
At 31 December 2016 - 362 970,565 970,927
Charge for year - - 44,845 44,845
------------ ------------------- ------------ --------------
At 31 December 2017 - 362 1,015,410 1,015,772
Impairment charge 950,700 950,700
Amortisation charge for year - - 44,845 44,845
------------ ------------------- ------------ --------------
At 31 December 2018 - 362 2,010,955 2,011,317
============ =================== ============ ==============
Net book value
At 31 December 2018 - 4,550,866 3,908,984 8,459,850
============ =================== ============ ==============
At 31 December 2017 - 3,954,521 4,100,426 8,054,947
============ =================== ============ ==============
Intellectual
Company property
US$
At 31 December 2016 2,746,396
Transfers to other group companies (2,746,396)
-------------
At 31 December 2017 -
-------------
At 31 December 2018 -
=============
Accumulated amortisation
At 31 December 2016, 2017 and 2018 -
=============
Net book value
At 31 December 2017 & 2018 -
=============
Goodwill
Goodwill arose from the acquisition of Nikofeso and was
considered to relate solely to the underlying business acquired
which is a single cash generating unit ("CGU"). The asset was
reviewed at each balance sheet dates to assess if it had been
impaired. This Company was sold at the end of 2017 and therefore
the associated goodwill was included in loss on sale of
discontinued operations in the Income and Expenditure Statement for
that year.
Other intellectual property
Other intellectual property comprises costs incurred to secure
the rights and knowledge associated with the CoalSwitch(TM) and
PeatSwitch(TM) technology.
In 2015 the Group entered into a joint venture agreement with
Biomass Energy Enhancements LLC ("BEE"), incorporated in the United
States, for the joint commercial development and exploitation of
intellectual property assets held by BEE in connection with biomass
technologies. A long term loan to BEE was recognised in the
accounts to reflect monies loaned by AEG to the joint venture. An
agreement was later reached with the other joint venture partners
whereby AEG became the sole proprietor of this technology and as a
result the loan balance was transferred to intangible fixed
assets.
Costs which specifically relate to future plant design have been
capitalised an intangible fixed assets.
Development assets
Development assets relate to the following:
Ukraine: The Group is party to a supply contract granted by the
Lyubomi Forestry, which is the administrator of the Lyubomi Forest
in the Ukraine. This contract was extended to October 2060 from 1
January 2015 and the Company is currently reviewing options to
develop this asset as feedstock for CoalSwitch(TM) plants in
Eastern Europe. The remaining useful life on the Ukrainian assets
is assessed to be 41 years and the asset is being amortised over
this period. Management undertakes
a review at each balance sheet date to assess whether these
balances need to be impaired. As a result of this review the group
recorded an impairment charge of US$668,073 for the year ended 31
December 2018.
Northern Alberta: During 2014 the Group acquired a 45% interest
in a joint venture, KAQUO Forestry & Natural Resources
Development Corporation, incorporated in Canada, to exclusively
commercialise forestry and agricultural land holdings belonging to
the indigenous Métis Settlements of Alberta in Western Canada. Cost
associated with this activity were originally recorded as
Investments in Associates. This Joint Venture is no longer
operational. However, AEG is continuing to work with the Canadian
authorities and its partners in Northern Alberta to develop and
secure title to and monetise these assets. As a result the costs
incurred on the joint venture were transferred to intangible fixed
assets during 2017, on the basis that these costs fulfil the
definition of an internally generated intangible fixed asset under
IAS38.
These costs will be amortised over the period of awarded
licences. No amortisation has been recognised in the current
accounting period pending licence awards and commencement of
production. In addition, management undertakes a review at each
balance sheet date to assess whether these balances need to be
impaired. As a result of this review the group recorded an
impairment charge of US$282,627 for the year ended 31 December
2018.
Newfoundland: On 29 November 2018 the Provincial Government of
Newfoundland & Labrador announced that it had issued two
five-year commercial cutting permits to Timberlands International
(Newfoundland and Labrador) Inc., a subsidiary of Active Energy
Group (AEG) Plc, totalling 100,000 m3 annually (500,000 m3 over
five years) in Forest Management Districts 17 and 18 on the Great
Northern Peninsula. Prior to this date AEG invested significant
time and resources in developing management and supplier capability
as well as government relations in order to not only secure the
licences, but also to develop the business model and capabilities
to monetise the permits once awarded.
Costs incurred in acquiring these licences have been recorded as
additions to intangible fixed assets These costs will be amortised
over the period of awarded licences. No amortisation has been
recognised in the current accounting period as the licence awards
occurred at the end of 2018 and commencement of production had not
occurred at the balance sheet date. Management undertakes a review
at each balance sheet date to assess whether these balances need to
be impaired. No impairment was recorded for the year ended 31
December 2018.
11. PROPERTY, PLANT AND EQUIPMENT
Group Plant
Furniture
and office
and equipment equipment Total
US$ US$ US$
Cost
At 31 December 2016 3,187,609 32,346 3,219,955
Foreign exchange difference (534,717) 768 (533,949)
Additions 4,219,081 - 4,219,081
Disposals (3,080,362) (24,154) (3,104,516)
-------------- ------------ ------------
At 31 December 2017 3,791,611 8,960 3,800,571
Additions 2,069,877 - 2,069,877
Disposals (420,600) - (420,600)
-------------- ------------ ------------
At 31 December 2018 5,440,888 8,960 5,449,848
============== ============ ============
Accumulated depreciation
At 31 December 2016 628,633 29,177 657,810
Foreign exchange difference (155,592) (20,737) (176,329)
Elimination on disposal (752,588) (406) (752,994)
Charge for year 279,547 926 280,473
-------------- ------------ ------------
At 31 December 2017 - 8,960 8,960
Impairment charge 65,000 65,000
-------------- ------------ ------------
At 31 December 2018 65,000 8,960 73,960
============== ============ ============
Net book value
At 31 December 2018 5,375,888 - 5,375,888
============== ============ ============
At 31 December 2017 3,791,611 - 3,791,611
============== ============ ============
The net book value of asset held under finance leases included
within Property, Plant & Equipment above are US$nil (2017:
US$345,600). No depreciation (2017:nil) has been charged on these
assets as the machinery had not been brought into use at the
balance sheet dates.
Additions in the year primarily relate to the construction of
the inaugural CoalSwitch(TM) plant in Utah. The exchange rates
movements in 2017 relate to the reduction in value of the Ukrainian
Wood Fibre business, which was denominated in Ukrainian Hryvnia.
This business was discontinued during 2017.
US$
Cost
At 31 December 2016 8,193
Foreign exchange difference 767
------
At 31 December 2017
& 2018 8,960
======
Accumulated depreciation
At 31 December 2016 7,931
Charge for year 755
Foreign exchange difference 274
------
At 31 December 2017
& 2018 8,960
======
Net book value
At 31 December 2017
& 2018 -
======
12. INVESTMENTS IN SUBSIDIARIES
Company
Cost US$
At 31 December 2016 4,611,570
Additions 58,431
Disposals (546,804)
Foreign exchange translation difference 431,848
----------
At 31 December 2017 & 2018 4,555,045
==========
Provision for impairment
At 31 December 2016 2,571,278
Charge for the period 1,684,557
Foreign exchange translation difference 240,783
----------
At 31 December 2017 & 2018 4,496,618
==========
Net book value
----------
At 31 December 2017 & 2018 58,427
==========
At 31 December 2018 the Group held share capital of the
following companies:
Subsidiary undertaking Country of incorporation Nature of business Percentage Holding
2018 2017
Woodchip processing
AE Ukraine Ukraine and distribution 100 100
Nikofeso Holdings
Limited Cyprus Wood chip distribution 100 100
AETrading (EMEA)
SarL Switzerland Wood chip distribution 100 100
AEG Trading
Limited United Kingdom Wood chip distribution 100 100
AEG Pelleting
Limited United Kingdom Biomass for energy development 100 100
AEG Biopower
Limited United Kingdom Biomass for energy development 100 100
AEG Coalswitch
Limited United Kingdom Biomass for energy development 100 100
ABS plc United Kingdom Biomass for energy development 85 85
Timberlands
Int. Ltd United Kingdom Biomass for energy development 81 95
Alpha Prospects Energy investments holding
Ltd United Kingdom company 4.2 4.2
AEG CoalSwitch
USA LLC United States Biomass for energy development 100 -
Timberlands
Newfoundland
& Labrador Inc Canada Biomass for energy development 81 -
13. INVESTMENT IN ASSOCIATE
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Carrying value at beginning
of the year - 1,282,627 - 2,333,176
Transfer to intangible (1,282,627)
fixed assets - - -
Transfer to other group
companies - - - (2,333,176)
------- ------------ -------- ------------
Carrying value at end
of the year - - - -
------- ------------ -------- ------------
During 2014 the Group acquired a 45% interest in a joint
venture, KAQUO Forestry & Natural Resources Development
Corporation (KAQUO), incorporated in Canada, to exclusively
commercialise forestry and agricultural land holdings belonging to
the indigenous Métis Settlements of Alberta in Western Canada.
This joint venture is no longer operational and the licences
were not awarded as anticipated. However, AEG is continuing to work
with the Canadian authorities and its partners in Alberta to
develop and secure title to these assets. As a result the costs
incurred on the joint venture were transferred to intangible fixed
assets during 2017
Summarised financial information in relation to the joint
venture is presented below:
2018 2017
US$ US$
At 31 December
Current assets - -
Current liabilities - -
Period ended 31 December
Revenues - -
Loss for the year - -
Other comprehensive income - -
Total comprehensive income - -
14. LONG TERM LOANS
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Carrying value at beginning
of the year - 1,911,121 - 1,911,121
Transfer to intangible
fixed assets - (1,911,121) - -
Transfer to other group
companies - - - (1,911,121)
Transfer from current
assets - - 15,577,661 -
Accrued interest - - 1,794,573 -
------- ------------ ----------- ------------
Carrying value at end
of the year - - 17,372,234 -
======= ============ =========== ============
In September 2015 the Group entered into a joint venture
agreement with Biomass Energy Enhancements LLC ("BEE"),
incorporated in the United States, for the joint commercial
development and exploitation of intellectual property assets held
by BEE in connection with biomass technologies.
A long term loan to BEE was recognised in the accounts to
reflect monies loaned by AEG to the joint venture. An agreement was
later reached with the other joint venture partners whereby AEG
became the sole proprietor of this technology and as a result the
loan balance was transferred to intangible fixed assets during
2017.
During 2018 certain intercompany debts were reclassified as long
term to reflect the commercial reality of the likely repayment
schedule of these loans. Interest was accrued at a rate of 12 %
which is considered to be a market rate.
15. AVAILABLE FOR SALE FINANCIAL ASSET
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Fair value at beginning
of the year 786,873 83,455 786,873 83,455
Revaluation to market
value - 786,483 - 786,393
Foreign exchange translation (34,658) (83,065) (34,658) (83,065)
Fair value at end of the
year 752,215 786,873 752,215 786,873
========= ========= ========= =========
Available for sale assets consist of an unquoted equity
instrument which is classified as non- current assets. The asset
was revalued in 2017 based on the proceeds received from issue of
shares by this entity, less a discount to reflect the absence of a
liquid market for these shares. This revaluation was reperformed in
2018 and based on that assessment management concluded that the
2017 valuation remained valid. The available-for-sale financial
asset is denominated in Pound Sterling.
16. INVENTORIES
Group 2018 2017
US$ US$
Raw materials - 20,349
Total inventories - 20,349
====== =======
17. TRADE AND OTHER RECEIVABLES
In the Directors' opinion the carrying values of trade and other
receivables are stated at their fair value, after deduction of
appropriate allowances for irrecoverable amounts as these assets
are not interest bearing and receipts occur over a short period and
are subject to an insignificant risk of changes in value.
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Current
Trade receivables - 128,136 - 128,136
Amounts due from group
companies - - 379,778 13,629,890
Other receivables 1,198 - -
VAT 77,212 42,046 77,212 14,642
Prepayments - - - -
Corporation tax credit
receivable 1,627,198 346,522 327,278 -
========== ======== ======== ===========
Total 1,704,410 517,902 784,268 13,772,668
========== ======== ======== ===========
Trade and other receivables that have not been received within
the payment terms are classified as overdue. As at 31 December 2018
trade receivables of US$Nil (2017: US$Nil) were overdue.
As at 31 December 2018, Group trade receivables of US$NIL (2017:
US$NIL and 2016: US$NIL) were overdue and impaired. An analysis of
the Group's trade and other receivables classified as financial
assets by currency is provided in note 27.
18. CASH AND CASH EQUIVALENTS
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Bank accounts 298,768 142,049 234 135,706
-------- -------- -------- --------
298,768 142,049 234 135,706
======== ======== ======== ========
19. TRADE AND OTHER PAYABLES
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Current
Trade payables 2,038,818 936,111 798,603 200,512
Social security and other
taxes 3,122 45,902 3,122 41,598
Accruals and deferred income 809,753 866,594 667,889 859,279
Other payables - 96,069 - 21,069
---------- ---------- ---------- ----------
2,851,693 1,944,676 1,469,614 1,122,458
========== ========== ========== ==========
The carrying values of trade and other payables approximate
their fair value as payments occur over a short period and the risk
of material changes in value is insignificant. The following table
analyses the maturity of the trade and other payables, excluding
borrowings. These are classified as financial liabilities on the
balance sheet and they are measured at amortised cost.
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Less than three months 2,851,693 1,944,676 1,469,614 372,458
Three to 12 months - - - 750,000
---------- ---------- ---------- ----------
2,851,693 1,944,676 1,469,614 1,122,458
========== ========== ========== ==========
The amounts shown are undiscounted and represent the contractual
cash-flows. An analysis of the Group's trade and other payables
classified as financial liabilities by currency is provided in note
27.
20. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the
liability method using tax rates applicable in the respective Group
entities' jurisdiction. The movement on the deferred tax account is
shown below and the balance relates to deferred tax on fair value
adjustments related to intangibles:
Group 2018 2017
US$ US$
At beginning of the period 384,169 393,137
Reversal of temporary differences (8,968) (8,968)
Impairment charge (133,616) -
---------- --------
At the end of the period 241,585 384,169
========== ========
The deferred tax liability relates to temporary differences
arising on the fair valuation of intangible assets acquired in
2011.
No provision for the deferred tax asset in respect of tax losses
has been made in the Group or Company due to the uncertainty of the
Group or Company being able to generate sufficient future taxable
profits from which the future reversal of the timing difference can
be deducted. See note 8 for further details of this balance.
21. FINANCE LEASES
The future minimum finance lease payments are as follows:
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Less than 1 year - 89,607 - -
Between 1 and 3 years - 205,993 - -
------ -------- -------- --------
- 295,600 - -
====== ======== ======== ========
The finance lease related to a Pellet Mill leased from the
manufacturer for use at the Utah CoalSwitch(TM) plant. The lease
term is 3 years. At the end of the lease term the company had the
option to purchase the asset for $1. This piece of machinery was
returned to the supplier during 2018
22. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as
follows:
Group Book value Fair value Book value Fair value
2018 2018 2017 2017
US$ US$ US$ US$
Non-Current
Convertible debt 11,672,738 11,672,738 13,224,252 13,224,252
Unsecured loans - - - -
----------- ----------- ----------- -----------
11,672,738 11,672,738 13,224,252 13,224,252
=========== =========== =========== ===========
Current
Convertible debt - - - -
Unsecured loans 1,327,707 1,327,707 - -
----------- ----------- ----------- -----------
1,327,707 1,327,707 - -
----------- ----------- ----------- -----------
Total loans and borrowings 13,000,445 13,000,445 13,224,252 13,224,252
=========== =========== =========== ===========
Company Book value Fair value Book value Fair value
2018 2018 2017 2017
US$ US$ US$ US$
Non-Current
Convertible debt 11,672,738 11,672,738 13,224,252 13,224,252
Unsecured loans - - - -
----------- ----------- ----------- -----------
11,672,738 11,672,738 13,224,252 13,224,252
=========== =========== =========== ===========
Current
Convertible debt - - - -
Unsecured loans 1,000,000 1,000,000 - -
----------- ----------- ----------- -----------
1,000,000 1,000,000 - -
----------- ----------- ----------- -----------
Total loans and borrowings 12,672,738 12,672,738 13,224,252 13,224,252
=========== =========== =========== ===========
Unsecured loans
During the year the Group obtained $1.3m of unsecured loans.
Convertible debt
On the 14 March 2017 the company successfully completed a fund
raising of GBP11.57 million before expenses (or $14.15 million)
through the issue of convertible loan notes ('CLNs') to new and
existing investors. The CLNs have a maturity date of 14 March 2022
and have been listed on the International Securities Exchange. The
CLN can be converted into Ordinary Shares of AEG plc, at any time
prior to the Maturity Date, at a 30% premium to 2.535p, being the
Company's 10 day Volume Weighted Average Price immediately prior to
the issue date. The fair value of the liability component at
inception was calculated using a market interest rate for an
equivalent instrument without conversion option. The CLN has a
coupon rate of 8% and the imputed interest rate applied was
12%.
During 2018 certain note holders took the opportunity to convert
their CLN's into AEG Ordinary Shares. Details of these transactions
are disclosed below in note 23. On 15 March 2017 the Convertible
Loan Note to Brahma Finance for GBP1,000,000 was repaid in full and
settled. The following table analyses the maturity of loan and
borrowings. The amounts shown are undiscounted and represent
contractual cash-flows.
Group Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5
months months years years Total
US$ US$ US$ US$ US$
At 31 December
2018
Convertible debt - - - 11,672,738 11,672,738
Unsecured loans 1,327,707 - - 1,327,707
---------- ---------- --------- ----------- -----------
1,327,707 - - 11,672,738 13,000,445
========== ========== ========= =========== ===========
US$ US$ US$ US$ US$
At 31 December
2017
Convertible debt - - - 13,224,252 13,224,252
---------- ---------- --------- ----------- -----------
- - - 13,224,252 13,224,252
========== ========== ========= =========== ===========
Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5
months months years years Total
Company
US$ US$ US$ US$ US$
At 31 December
2018
Convertible debt - - - 11,672,738 11,672,738
Unsecured loans 1,000,000 - - 1,000,000
---------- ---------- --------- ----------- -----------
1,000,000 - - 11,672,738 12,672,738
========== ========== ========= =========== ===========
US$ US$ US$ US$ US$
At 31 December
2017
Convertible debt - - - 13,224,252 13,224,252
---------- ---------- --------- ----------- -----------
- - - 13,224,252 13,224,252
========== ========== ========= =========== ===========
23. CALLED UP SHARE CAPITAL
2018 2018 2017 2017
Number US$ Number US$
Allotted, called up and
fully paid
Ordinary shares of 1p
each
At 1 January 983,071,276 14,493,246 840,381,500 12,621,134
Issue of shares 252,048,516 3,282,913 142,689,776 1,872,112
Cancellation of treasury
shares (33,212,841) (510,780) - -
-------------- ----------- ------------ -----------
As at 31 December 1,201,906,951 17,265,379 983,071,276 14,493,246
============== =========== ============ ===========
During 2018 the Company issued 252,048,516 Ordinary Shares for a
total consideration of US$5.6m as follows:
-- On 28 March 2018 the Company announced the issue of
13,792,164 at 4.9 cents satisfying exercise notices over CLN's.
-- On 20 April 2018 the Company announced the issue of 4,855,105
at 4.6 cents satisfying exercise notices over CLN's.
-- On 4 May 2018 the Company announced the issue of 11,565,537
at 5.0 cents satisfying exercise notices over CLN's.
-- On 10 May 2018 the Company announced the issue of 7,282,658
at 4.5 cents satisfying exercise notices over CLN's.
-- On 30 May 2018 the Company announced the issue of 12,137,763
at 4.4 cents satisfying exercise notices over CLN's.
-- On 26 June 2018 the Company announced the issue of 33,333,333
at 4.0 cents following a new share placement.
-- On 5 October 2018 the Company announced the issue of
4,081,955 at 4.8 cents satisfying exercise notices over CLN's.
-- On 30 November 2018 the Company announced the issue of
165,000,000 at 1.27 cents following a new share placement.
During 2017 the Company issued 142,689,776 ordinary shares for a
total consideration of US$3.3m as follows:
-- On 27 June 2017 the company issued 17,623,110 Ordinary Shares
at 1.6 US cents satisfying exercise notices over warrants in
issue.
-- On 6 November 2017 the company issued 83,333,333 Ordinary
Shares at 2.7 US cents following a new share placement.
-- On 21 December 2017 the company issued 40,000,000 Ordinary
Shares at 1.6 US cents satisfying exercise notices over share
options in issue.
-- On 21 December 2017 the company issued 1,733,333 Ordinary
Shares at 1.6 US cents satisfying exercise notices over warrants in
issue.
24. SHARE OPTIONS AND WARRANTS
From time to time the Company has entered into share option
arrangements under which the holders are entitled to subscribe for
a percentage of the Company's ordinary share capital. All options
vest immediately with the exception of 41,000,000 (2017:
14,166,667) options which are based on various market, service and
performance conditions. The number of warrants and share options
exercisable at 31 December 2018 was 124,825,099 (2017:
127,325,099).
The movements of warrants and share options during the period
were as follows:
Weighted Number Weighted Number
average of Warrants average of Warrants
exercise and Share exercise and Share
price (UK Options price (UK Options
pence) pence)
Outstanding at beginning
of the period 2.72 127,325,099 1.96 239,655,831
Cancelled 2.59 (78,500,000) 1.09 (54,707,622)
Granted - - - -
Exercised 4.31 76,000,000 1.25 (57,623,110)
Outstanding at end of the
period 3.77 124,825,099 2.72 127,325,099
=========== ============= =========== =============
At 31 December 2018, the weighted average remaining contractual
life of warrants and share options exercisable was 4.55 years (2017
- 4.02 years). Total share option of 41,000,000 (2017: nil) were
granted during the year at a weighted average exercise price of 6.5
pence.
There was charge for equity settled share based payments of
US$895,430 (2017: US$307,749) in the income statement for the year
ended 31 December 2018. In addition, during the year ended 31
December 2018 certain share options were cancelled. This resulted
in a credit to equity settled share based payments of US$810,109
(2017: US$1,044,450). This was not shown in the income statement
for the year ended 31 December 2018, but was recorded as a reserve
transfer.
Options and warrants outstanding at 31 December 2018 were
exercisable as follows:
Exercise price range (Pence, US cents 2018 2017
in brackets)
Number Number
1.250p (1.686 cent) - 56,500,000
1.500p (2.023 cent) 7,500,000 7,500,000
1.750p (2.360 cent) 19,047,619 19,047,619
1.750p (2.2341 cent) 35,000,000 -
3.000p (4.047cent) 13,450,000 13,450,000
4.500p (6,281 cent) 20,500,000 -
5.000p (6.745 cent) 2,000,000 15,000,000
6.000p (8.094 cent) 4,500,000 4,500,000
6.375p (8.600 cent) 1,823,480 1,823,480
7.500p (10.118 cent) - 9,000,000
8.500p (11.863 cent) 20,500,000 -
20.000p (26.982 cent) 504,000 504,000
------------ ------------
At the end of the period 124,825,099 127,325,099
============ ============
The above disclosures apply to both the Company and the
Group.
JSOP awards
Under the JSOP, shares in the Company are jointly purchased at
fair market value by the participating employee and the trustees of
the JSOP trust, with such shares held in the JSOP trust. For
accounting purposes, the awards are valued as employee share
options.
The JSOP trust holds the shares of the JSOP until such time as
the JSOP shares are vested and the participating employee exercises
their rights under the JSOP. The JSOP trust is granted an interest
bearing loan by the Company in order to fund the purchase of its
interest in the JSOP shares. The loan held by the trust is
eliminated on consolidation in the financial statements of the
Group. The Company funded portion of the share purchase price is
deemed to be held in treasury until such time as the shares are
transferred to the employee and is recorded as a reduction in
equity in both the Group and Company financial statements.
The exercise price of the "option" is deemed to be the issue
price of the shares. The awards vest based on a market condition,
which requires the shares to meet a specific share price hurdle, or
a change in control condition, as defined by the plan. Under the
JSOP and subject to the vesting of the employee's interest, the
participating employee will, when the JSOP shares are sold, be
entitled to a share of the proceeds of sale equal to the growth in
market value of the JSOP shares versus the exercise price, less
simple interest on the original share purchase price, net of
executives' cash contribution at inception, as agreed for each
grant (the "Carry Charge"). The balance of proceeds will remain to
the benefit of the JSOP trust and be applied to the repayment of
the loan originally made by the Company to the JSOP trust. Any
funds remaining in the JSOP trust after settlement of the loan and
any expenses of the JSOP trust are for the benefit of the
Company.
The Group measures the fair value of the awards using the Monte
Carlo (JSOP options) the share based payment expense is recorded
over the expected life of the option. Share based payment expenses
are recognised in the income statement in accordance with the
provisions of IFRS2.
The Group granted 15,000,000 JSOP awards on 4 July 2013. The
JSOP awards granted during 2013 contained a share price hurdle of
3p per share. The awards vested in 2015, but all remain outstanding
at year end. These disclosures apply to both the Company and the
Group. No awards were made in 2018 (2017:Nil). The share based
payment charge for the year is US $Nil (2017: US$Nil) related to
the JSOP awards.
25. RESERVES
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess
of nominal value.
Merger reserve Difference between fair value and nominal
value of shares issued to acquire 90% or more
interest in subsidiaries.
Foreign exchange Gains/losses arising on retranslating the
reserve net assets of overseas operations into US
Dollars.
Own shares held Cost of own shares held by the employee benefit
reserve trust, the JSOP trust or the company as shares
held in escrow.
Convertible debt Equity component of the convertible loan and
and warrant reserve the fair value of equity component of warrants
issued that do not form part of a share based
payment.
Retained earnings/ Cumulative net gains and losses recognised
Accumulated loss in the consolidated statement of comprehensive
income.
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from
operating activities
Group 2018 2017
US$ US$
Loss for the period (3,186,479) (15,221,072)
Adjustments for:
Share based payment expense 895,430 307,749
Depreciation - 280,473
Amortisation of intangibles 44,845 44,835
R&D expensed to income statement - 1,244,045
Impairment of property plant
& equipment 65,000 -
Impairment of intangible assets 950,700 2,212,930
Loss/ (profit) on disposal
of PP&E 1,778 2,130,018
Revaluation of investments
for resale 34,658 (454,928)
Foreign currency translations (966,788) (556,421)
Finance expenses 1,047,283 3,031,054
Income tax (142,584) (4,781)
------------ -------------
(1,256,157) (6,986,098)
(Increase)/decrease in inventories 20,349 404,649
(Increase)/decrease in trade
and other receivables (1,186,508) 2,132,430
(Decrease)/increase in trade
and other payables 907,017 (1,372,076)
------------ -------------
Net cash outflow from operating
activities (1,515,299) (5,821,095)
============ =============
Company 2018 2017
US$ US$
Loss for the period (1,800,792) (11,218,600)
Adjustments for:
Share based payment expense 895,430 307,749
Depreciation - 755
Impairment of investments /
intercompany debtors - 2,040,292
Revaluation of investments - (454,928)
Foreign currency translations (932,168) 702,918
Finance expenses 1,047,283 1,648,174
------------ -------------
(790,247) (6,973,640)
Decrease in trade and other
receivables (3,799,666) (6,457,872)
Increase/(decrease) in trade
and other payables 347,156 (285,578)
Net cash inflow/(outflow) from
operating activities (4,242,757) (13,717,090)
============ =============
27. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a
speculative nature. In the course of trade the Group is exposed to
a number of financial risks that can be categorised as market,
credit and liquidity risks. The board reviews these risks and their
impact on the activities of the Group on an ongoing basis.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
-- Trade and other receivables
-- Cash and cash equivalents
-- Trade and other payables
-- Available-for-sale financial assets
-- Loans and borrowings
A summary of the financial instruments held by category is
provided below:
Financial assets Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Loans and receivables
Cash and cash equivalents 298,768 142,049 234 135,706
Trade and other receivables 1,704,410 517,902 18,156,502 13,772,668
----------- ----------- ----------- -----------
2,003,178 659,951 18,156,736 13,908,374
----------- ----------- ----------- -----------
Available-for-sale financial
asset 752,215 786,873 752,215 786,873
----------- ----------- ----------- -----------
Total financial assets 2,755,393 1,446,824 18,908,951 14,695,247
=========== =========== =========== ===========
Financial liabilities Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
Financial liabilities
at amortised cost
Trade and other payables 2,851,693 2,240,276 1,469,614 1,122,458
Loans and Borrowings 13,000,445 13,224,252 12,672,738 13,224,252
----------- ----------- ----------- -----------
15,852,138 15,464,528 14,142,352 14,346,710
=========== =========== =========== ===========
Fair value measurement
The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair
value measurements are categorised into different levels based on
how observable the inputs used in the valuation technique utilised
are (the 'fair value hierarchy'):
Level 1: Quoted prices in active markets for identical items
(unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1
inputs
Level 3: Unobservable inputs (i.e. not derived from market
data).
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item.
Transfers of items between levels are recognised in the period
they occur.
The only financial asset carried at fair value consists of the
available for sale financial asset, which is classified as level
3.
Market Risk
Currency risk
The Group's financial risk management objective is broadly to
seek to make neither profit nor loss from exposure to currency or
interest rate risks. The Group is exposed to transactional foreign
exchange risk and takes profits and losses as they arise, as in the
opinion of the directors, the cost of hedging against fluctuations
would be greater than the potential benefits.
The carrying amounts of the group's trade and other receivable
financial instruments are denominated in the following
currencies:
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
US Dollar - - 17,752,012 13,629,890
UK Pound sterling 1,704,410 517,902 404,490 14,642
Euro - - - 128,136
Ukrainian Hryvnia - - - -
---------- -------- ----------- -----------
1,704,410 517,902 18,156,502 13,772,668
========== ======== =========== ===========
The carrying amounts of the group's cash and cash equivalents
are denominated in the following currencies:
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
US Dollar 2,397 134,510 - 132,262
UK Pound sterling 296,371 3,945 234 3,244
Euro - 2,214 - 200
Ukrainian Hryvnia - 1,380 - -
-------- -------- -------- --------
298,768 142,049 234 135,706
======== ======== ======== ========
Information about the Group's loans and borrowings are provided
in note 22.
27. FINANCIAL INSTRUMENTS (continued)
The carrying amounts of the group's trade and other payable
financial instruments are denominated in the following
currencies:
Group Group Company Company
2018 2017 2018 2017
US$ US$ US$ US$
US Dollar 1,371,978 1,106,200 - -
UK Pound sterling 1,469,614 1,122,457 1,469,614 1,122,458
Euro - 4,304 - -
Ukrainian Hryvnia 10,101 7,315 - -
---------- ---------- ---------- ----------
2,851,693 2,240,276 1,469,614 1,122,458
========== ========== ========== ==========
The effect of a 5 per cent strengthening of the US Dollar at the
reporting date on the foreign denominated financial instruments
carried at that date would, all variables held constant, would have
resulted in a decrease in net assets by US$46,713 (2017: increased
in net assets US$7,107). A 5 per cent weakening in the exchange
rate would, on the same basis, have increased the net loss and
decreased net assets by the same amount.
Interest rate risk
The Group and Company finances its operations through a mixture
of equity and loans. The Group and Company exposure to interest
rate fluctuations on its borrowings has been limited by the terms
of the Convertible Loan Notes described in note 22.
Credit risk
Operational
The Group is mainly exposed to credit risk from credit
agreements and sales. It is the Group's policy, implemented
locally, to assess the credit risk of new customers before entering
contracts. Such credit ratings, taking into account local business
practices are then factored into trading decisions. The Group does
not enter into any derivatives to manage credit risk. Further
information on Trade and other receivables are presented in note
17.
Financial
Financial risk relates to non-performance by banks in respect of
cash deposits and is mitigated by the selection of institutions
with a strong credit rating.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The Group finances its operations through a mix of
equity and borrowings. The Group's objective is to provide funding
for future growth. The Group's policies aim to ensure sufficient
liquidity is available to meet foreseeable needs through the
preparation of short and long term forecasts. Further disclosure of
the Directors' consideration of going concern is included in note
1.
The Group had no bank loans or invoice finance facilities at 31
December 2018 (2017: Nil). The Group had an overdraft at 31
December 2018 of $843 (2017: Nil) which is disclosed within other
payables as a liability on the balance sheet. No personal
guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and
maintain a capital structure that safeguards the Group as a going
concern and provides a return to shareholders.
28. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of
the Directors.
Transactions between the Company and its subsidiaries, which are
related parties to the Company, have been eliminated on
consolidation. During the year in the Company's financial
statements, the Company made net cash recoveries from fellow Group
companies of US$nil (2017: US$nil).
The Company's intercompany receivable balances at the year-end
were as follows:
2018 2017
US$ US$
Amounts due from Group companies 17,752,012 13,629,890
========== ==========
29. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
The preparation of financial information in conformity with
International Financial Reporting Standards requires management to
make estimates and judgements that affect the reported amounts of
assets and liabilities as well as the disclosure of contingent
assets and liabilities at the year-end date and the reported
amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. The significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were as follows:
Impairment of goodwill, intangible fixed assets and other
assets
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount of
cash generating units is determined based on value in use
calculations. The use of this method requires the estimation of
future cash flows and the choice of a discount rate in order to
calculate the present value of the cash flows. Actual outcomes may
vary. Intangible fixed assets and other assets are considered for
impairment where such indicators exist using value in use
calculations or fair value and recoverability estimates. The use of
these methods similarly requires the estimation of future cash
flows and the choice of a discount rate in order to calculate the
present value of the cash flows.
Share based payments
In determining the fair value of equity settled share based
payments and the related charge to the income statement, the Group
makes assumptions about future events and market conditions. In
particular, judgements must be made as to the fair value of each
award granted. The fair value is determined using a valuation model
which is dependent on further estimates, including the Group's
future dividend policy, the timing with which options will be
exercised and the future volatility in the price of the Group'
shares. Such assumptions are based on publicly available
information and reflect market expectations and advice taken from
qualified personnel. Different assumptions about these factors to
those made by the Group could materially affect the reported value
of share based payments.
Useful lives of intangible assets and property, plant and
equipment
Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period that the assets
will generate revenue, which are periodically reviewed for
continued appropriateness. Changes to estimates can result in
significant variations in the carrying value and amounts charged to
the consolidated statement of comprehensive income in specific
periods.
Recognition of development costs within intangible fixed
assets
The Group undertakes certain development activity, which is
recognised within intangible fixed assets, if it meets certain
criteria laid down by international accounting standards. This
means that management is required to assess various factors
associated with these assets to determine whether the asset is
separately identifiable, that it is probable that future economic
benefits attributable to will arise; the technical feasibility of
completing the asset; that the Group intends and is able to
complete the asset; and there are available and adequate technical,
financial and other resources to complete the asset. All these
matters involve technical and economic judgement and changes to
these assessments can result in significant variations in the
carrying value and amounts charged to the consolidated statement of
comprehensive income in specific periods.
30. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2018 were US$nil (2017:
US$408,908). Operating lease commitments at the 31 December 2018
were US$nil (2017: US$11,142). All amounts were due within one
year.
31. SUBSEQUENT EVENTS
The key business developments since 31 December 2018 were as
follows:
-- On 4 March 2019 AEG announced that it had entered into an
agreement with Alamac Holdings LLC to acquire an industrial site in
Lumberton, North Carolina for US$3.3m. The acquisition was funded
by the issue of CLNs to new and existing institutional investors.
The acquisition was completed on 27 March 2019.
-- On 23 April 2019 AEG announced that it has been awarded a
US$500,000 building re-use and renovation grant for the Lumberton
site.
-- On 4 June 2019 AEG provided a progress update regarding the
next stage of development at its industrial site in Lumberton. The
update noted that the team was making rapid progress advancing
construction of new CoalSwitch(TM) operation at Lumberton, U.S,
that the test reactor were operational and that a five-year
contract had been signed for the supply of up to 800,000 tonnes per
annum of feedstock to Lumberton.
-- Management continues to actively discuss opportunities with
existing and prospective partners and potential providers of
project finance, in order execute Active Energy's business plan
following the acquisition of the Lumberton Site.
Further details are provided in the Chief Executive Officer's
statement.
32. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate
controlling party.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKADNDBKBAAB
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